More housing at U-M Arby's site?

Opus Development Corp. has signed a letter of intent to buy the Arby’s site near the University of Minnesota, where it intends to develop more student housing, according to a source familiar with the deal.

The project is the latest in a slew of student-housing developments planned for the university area, which combined will create hundreds of units that will hit the market in the next few years.

Dave Menke, senior vice president and general manager of Minnetonka-based Opus, confirmed that the company is interested in the so-called Arby’s site, but he declined to share details about the status or price of land acquisition.

Bob Andrews, owner of Minneapolis-based Andrews Inc., who owns the site, couldn’t be reached for comment. Andrews had marketed the site to other student-housing developers active in the area for a price near $8 million, according to sources who declined to be named to protect client relationships.

It isn’t clear when the Arby’s would close or if it would move somewhere else near campus. Officials at Arby’s Restaurant Group Inc. office in Atlanta couldn’t be reached for comment. A store manager said the restaurant is owned by Arby’s, not a franchisee, and that its lease runs until January 2014.

The site includes five parcels and three buildings, the Arby’s property at 1016 Washington Ave. S.E., ZLB Plasma Services at 1024 Washington and a two-story brick office building that was built in 1906 at 2408 University Ave. S.E.

The 2-acre property has a taxable value of about $3.7 million, according to Hennepin County property tax records. The site is large enough to accommodate between 150 and 200 units and some retail uses.

Assuming a deal goes through, an Opus student-housing project will face an increasing number of competitors, including some from Opus. Some of the other student housing projects in the works near campus are:

• Stadium Village Flats, a 120-unit project, which includes a CVS Pharmacy on the first level, that Opus is developing at 850 Washington Ave. S.E.

• Solhaus, 75 apartments built by Solhem Cos. and located at 2428, Delaware St. S.E.

• FloCo Fusion, an 84-unit project that developer Clark Gassen is building at 1000 University Ave. S.E.

• 412 Lofts, a 102-unit project that Doran Cos., is building at 406 12th Ave. S.E.

• A 60-unit project that Doran plans to build on the Oak Street Cinema site at 313 Oak St. S.E. Doran said he has financing and plans to break ground on the Oak Street project this fall.

Doran said there’s still a strong market for student housing near campus, but he acknowledges there’s a point when there’s going to be too much.

“Not that there’s not demand, it’s that it’s a pricing aspect to it,” he said.

Developers need to offset their land and construction costs with higher rents and it’s not clear how deep the market is yet.

“The question is how much market is there for upper-priced product? That’s the big unknown.”

Doran said leasing this year has been a little bit slower than in 2010, when his firm was leasing new apartments it developed next to the Dinky Dome in Dinkytown.

“I think ultimately all the buildings will lease, but there’s more competition. We’re starting to get some price resistance in the market, in terms of these unit prices, and that will all factor into how much more is developed.”